Every day I’m grateful that I can read. Ignorance is not bliss. Ignorance is frustrating. It is frustrating for the ignorant person and for those of us who have to deal with ignorance in our daily lives.
After fifteen years in the mortgage industry, there are many things I don’t know and don’t understand about mortgages. So I would advise you to take the following with a grain of salt. You know, I mean, what do I know?
Have you heard any one mention FHA, VA, Rural Development or Public Housing Authorities when laying out plans on how to solve the current mortgage crisis?
The United States Department of Housing and Urban Development – Federal Housing Administration, The United States Department of Veterans Affairs – Home Loan Guaranty, the United States Department of Agriculture Rural Development and The United States Department of Housing and Urban Development Public Housing Authorities are government entities whose stated purpose is guess what? Assisting Americans with affordable housing programs.
One of our presidential candidates has put forth the following plan early in the campaign. “McCain’s aides said his home mortgage plan could help 200,000 to 400,000 people and cost $3 billion to $10 billion. That would be far less than the proposals offered by Clinton and Obama, but McCain aides said it would be bigger than the efforts envisioned by the Bush administration.
The plan would retire old loans that homeowners no longer can pay and replace them with less expensive, 30-year, fixed-rate mortgages that are federally guaranteed. McCain said families would gain “the opportunity to trade a burdensome mortgage for a manageable loan that reflects the market value of their home.”
FHA currently has a program called “Hope for Homeowners.” Straight from the horse’s mouth the program “HOPE for Homeowners may be able to help you, by refinancing your loan into a new 30-year fixed rate loan with lower payments.” Key features of the program are “home retention, new affordable mortgage based on current appraised value, 10 percent equity”, and “[E]quity and appreciation sharing with the Federal government.” FHA guarantees home loans, as do VA and Rural Development.
Do these plans sound similar?
To date, less than 4,000 homeowners have taken advantage of Hope for Homeowners. Why?
Could it be because FHA is under funded and under staffed? I’m going way out on a limb here, so far as to suggest that we might not be in the current crisis, if more families had used government mortgage programs instead of conventional sub-prime loans offered by Fannie Mae and Freddie Mac.
Where is the marketing for this program?
I’m continuing to the outer most branch on the tree and suggesting that putting money into existing government housing entities and allowing them to do what they do best, may be a better idea than creating and funding additional government entities. I’m also suggesting that our government is in deep trouble. If I can read the FHA web site information, why can’t they. Or did an advisor actually read the details of the Hope for Homeowners program and think it was brilliant to put an existing program out there as the candidate’s proposal for saving the country’s distressed homeowners? This is crap.
What would happen if FHA had access to the same kind of advertising expertise that conventional lenders have (had)? Internet banners and pop ups; billboards across American; full page color ads in print media; office to office account executives signing up brokers and teaching loan officers how to analysis loan applications, calculate interest rates and submit loans? Actually asking for the business? In sales, they say you don’t begin selling until you ask for the sale and get your first objection. Then the dance begins. FHA hasn’t even finished dressing.
I’m not suggesting the use of the Ameriquest model of kamikaze marketing – if they don’t buy kill them. And everyone knows Ameriquest employed enough twenty something year old youths to staff another Army. But I am suggesting that lenders successfully marketed subprime products. How did the lenders do that? Can we take a look at what they did and use any of their marketing techniques in an ethical manner that makes folks aware of the government housing programs that already exist?
So, after Mr. Paulson and Mr. Bernake visit Wal-Mart and get some blue jeans and T-shirts (another sales technique, look like your target market so they will identify with you) and sit down with the former Countrywide advertising and marketing executives responsible for the successful sub prime campaigns can we trust them to actually move forward?
Is it too much to ask that the government beef up what we already have and stop reinventing the wheel? Then tell us they have the answer, like a lightning bolt hit them in the head and they got a message of deliverance?
I don’t understand anything about finance on the level that the esteemed financial and economic advisors to our presidential candidates do. Sometimes the simplest solution is right in front of our noses. Some body needs to sneeze.
Put some money into the existing government housing entities.
Develop the marketing plans that get out the message – help is available to distressed homeowners and potential homebuyers. Here and now, already in place.
Hire the staff to make it work (the country is full of unemployed mortgage and real estate folks, put them back to work before they all start developing web sites and writing blogs).
Stop making things complicated.
Do it now.
Somehow, I don’t think this will cost $3 to $10 billion, or $300 billionmuch less $700 billion. But what do I know? Some folks will pay anything for nothing.
Yasmin Sabur
Founding Partner
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